NY Senators Want Crackdown on No-Fault Insurance Scams

Laws in New York that would make it more difficult for criminals to cash in on the state’s “no-fault” auto insurance system are moving through the state Legislature, with the New York Senate approving a trio of bills this week.

Criminals take advantage of New York’s no-fault law that requires owners of registered vehicles to carry policies reimbursing drivers and passengers up to $50,000 for accident-related injuries regardless of fault. A Senate statement said such criminals use the “no-fault insurance program as their own giant state-sponsored, ATM machine.” Those looking for inexpensive vehicle insurance find higher prices as a result because such scams pump up the overall price of premiums—state officials estimate the cost to New Yorkers to be more than $1 billion a year.

Scammers Face Retroactive Cancellation of Policies

One of the bills, SB 4507B, allows insurers to retroactively cancel policies taken out by people illegally or with insufficient funds to commit insurance scams.

Current law bars insurers from retroactive cancellation of coverage after discovering a scam, but the most recent legislation allows an insurer to do so in the first 60 days if “the initial premium payment is not honored by a bank due to insufficient funds, non-existence of a bank account or unauthorized use of a bank account.”

“We must create a framework to allow our insurance companies to protect their legitimate customers and enhance penalties so that law enforcement personnel can prosecute those breaking the law,” said Sen. Martin Golden (R-Brooklyn), who sponsored the bill, in a statement. The bill also makes New York one of the largest no-fault states eliminating incentives for staged accidents and leaves seven other states—Arizona, Colorado, Kansas, Maryland, North Carolina, South Dakota and Maine—as the only ones prohibiting retroactive cancellation.

Penalties Stiffened for Auto Insurance Cons

Another one of the recently approved bills, SB 1685, creates a new felony class for criminals convicted of purposely causing an auto accident to benefit from an insurance payout.

The charge of “staging a motor vehicle accident” would be a class D felony under the new law and could lead to a maximum seven-year prison term. Sen. James L. Seward (R-Oneonta), who sponsored the legislation, said in a statement that “staged accidents also pose a serious public safety risk,” with criminals targeting women and elderly drivers because they are less likely to be hostile following such accidents.

The third bill, SB 2004, criminalizes the recruitment and use of “runners,” who are paid to find clients and patients to participate in no-fault scams. Sen. Dean Skelos (R-Nassau County), who sponsored the legislation, said runners in the New York City metropolitan area enable “medical mills” that submit phony claims for accident victims involved in scams. Skelos also said that such clinics have also been found to steal identities, policy numbers and even use information of the deceased for their criminal enterprises.

The legislation makes acting as or hiring a person as a runner a class E felony, punishable by up to four years in prison.

“Tough new penalties are needed to prevent ‘runners’ and other street-level criminals from taking advantage of our no-fault system—jeopardizing the availability of affordable insurance coverage and denying seriously injured victims the quality care they deserve,” Skelos said in a statement.

All three bills have been sent to the Assembly for further consideration.

About Charles Nguyen

Charles Nguyen is an enterprising journalist who reported for Patch.com and the Desert Dispatch and was the editor in chief of the Guardian (the twice-weekly newspaper at the University of California, San Diego) before coming to Online Auto Insurance News.